The assessment bonds are secured by special assessments levied and
collected in the affected area and by a covenant to pay debt service
from the city's water and sewer system (the system) net revenues after
payment of system senior and subordinate (state loans) obligations. Each
series of bonds are also secured by a surety-funded debt service reserve
fund.

KEY RATING DRIVERS

BACK-UP PLEDGE: The city's covenant to use net system revenues on a
subordinate basis to make up any shortfall in debt service payments on
outstanding assessment bonds is a key factor in determining the rating.
Assessments alone do not in all cases fully cover debt service.

LIMITED COVERAGE ON SPECIAL ASSESSMENT BONDS: Special assessments are
levied in small geographic areas and are structured to provide narrow
annual debt service coverage (DSC) on outstanding bonds, leaving little
margin for non-collection. Historical collections have been satisfactory
in most years. However, certain areas have had to utilize accumulated
excess assessment revenues and back-up utility revenues to meet annual
debt service (ADS) obligations.

TAX LIEN PROVIDES INCENTIVE: Special assessments are included as a line
item on the property tax bill with nonpayment resulting in a property
tax lien on parity with those related to ad valorem tax delinquencies.

RATING SENSITIVITIES

UTILITY CREDIT QUALITY: The rating on the special assessment bonds
relies heavily on the system's ability to cover shortfalls in special
assessments. A change in system credit quality would likely impact the
rating on the special assessment bonds.

CREDIT PROFILE

Cape Coral (implied general obligations rated 'AA-'/Outlook Stable) is
located on the southwest coast of Florida in Lee County 10 miles south
of Fort Myers and 125 miles south of Tampa. The city enjoys over 400
miles of waterways providing access to the Intercoastal Waterway and
Gulf of Mexico making it a popular vacation and retiree community.

CITY UTILITY SYSTEM PROVIDES BACKUP SUPPORT

The city's water and sewer system (water and sewer revenue rated
'A'/Outlook Stable) serves over 56,000 accounts located entirely within
city limits. Pursuant to a 20-year consumptive use permit issued by the
South Florida Water Management District, water supply is drawn from the
Upper Floridan Aquifer and is sufficient for the foreseeable future.
Treatment capacity for both water and wastewater is well in excess of
annual demand.

Fitch's rating on the system's revenue bonds reflects a high debt
burden, relatively high rates, expanded capital needs and rebounding
economic conditions. The system's cash balances declined significantly
in fiscal 2015, dropping to $9 million from $25 million the prior fiscal
year. The decrease is attributed to reduced collection of pre-paid
assessments and an increase in cash funded capital projects. Fitch
calculated DSC on senior and subordinate debt from net system revenues
plus capital expansion fees and special assessments totaled 1.5x in
fiscal 2015.

LIMITED COVERAGE FROM SPECIAL ASSESSMENT LEVIES

The city levies assessments annually in each area in an amount
sufficient to cover ADS. The levy also includes an amount equal to one
full percentage point above the interest rate on the relevant series of
bonds (the maximum discount allowed for early payment of the tax bill)
and the estimated cost of collections. While structured to achieve
approximately 1.1x DSC, tax collections have been below 100%, providing
even less cushion.

Historical collections have typically been sufficient to meet ADS.
However, certain areas have had to utilize accumulated excess assessment
revenues or advances from the system when collections have fallen short.
In fiscal years 2015, 2013, 2012, and 2011, advances of $45,523,
$21,146, $211,560 and $26,195, respectively, of surplus net revenues
from the system were transferred to support timely debt service payments
for several special assessment areas due to slightly weak tax
collections. Also, in fiscal 2014 the city failed to bill for the full
amount of the debt service requirement for all special assessment areas
resulting in a shortfall that was covered with the use of excess
assessment funds, not system revenues.

Special assessments are included as a line item on the property tax bill
with non-payment resulting in a property lien on parity with those
related to ad valorem tax delinquencies. It is city policy to redeem
area bonds from prepaid assessments.

The city has state revolving fund loan obligations which are secured by
special assessments from new project areas and a backup pledge of
surplus net system revenues. Payments on these loans do not begin until
Dec. 15, 2016, but are senior to the back-up pledge for the special
assessment debt, although subordinate to the system's senior lien bonds.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
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RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
WEBSITE.